Using Payments Tools to Meet the Unique Needs of Gen Z
Gen Z refers to those born between 1997 and 2012. This generation’s oldest members are now either nearing college graduation or already in the workforce. Consisting of approximately 68 million Americans (https://www.reuters.com/article/us-usa-funds-genz/as-millennials-age-more-u-s-companies-look-ahead-to-generation-z-idUSKBN1J8294), this generation will have a significant purchasing power in the U.S. Each new generation offers financial institutions the challenge and opportunity to discover the distinctive preferences and needs it has, particularly around banking and payments services.
Now that Gen Z is starting to enter the workforce and earning money of their own, financial institutions must also focus on how they can best serve this next generation. Before they can put a strategy into motion, however, FIs need to understand this unique generation’s background to better understand their expectations when it comes to banking and payments.
Gen Z and The Great Recession
This generation grew up amidst a tremendous financial collapse. The older members of Gen Z experienced the Great Recession in 2008 and remember the effect it had on their families, friends and their country as a whole. The reality of financial hardship that they witnessed at a young age has play a role in shaping the way they view money and financial institutions today.
Much of what they experienced in 2008 and onward has caused Gen Z to lose trust in financial institutions and also caused a lot of anxiety about personal finance. Watching banks and credit unions struggle to survive, many going through mergers and acquisitions, all while observing how people’s lives changed as a result of the recession, has Gen Z questioning whether or not they should trust banks or credit unions with their money or even need them at all because of other services like prepaid cards and the ever popular Venmo.
This mistrust, doubt and uncertainty about money has made Gen Z wary of debt. Though many members of this generation are at some point in their college career, they are more reluctant than millennials to take out student loans. This generation has also expressed a preference to avoid going into heavy debt to buy a car or a house.
The Role of Financial Education in Gen Z’s Financial Outlook
Gen Z also feels a lot of anxiety when dealing with financial matters because of their lack of financial education. Much of this generation does not know basic information about credit, borrowing money, saving and other important financial knowledge. They simply have not been taught a great deal about how to manage money, so it does not come as a surprise that they feel unease towards it, since people are prone to fear what they do not know. This presents a prime opportunity for FIs to reach out to educate this generation about finances in general and about smart payments tools that give Gen Z advice about payments, spending and saving to help them feel more at ease with their finances and serve as a trusted advisor and source of education.
The outlook for Gen Z is very good because they have shown a willingness to take advantage of financial educational offerings.
Gen Z has proved to be a more conservative generation than Millennials. Likely due to their fear of debt, members of Gen Z have demonstrated better habits around saving and are far less likely to overspend. This generation is also more practical than the previous one, favoring trade schools over college, in some cases. Members of Gen Z have a better understanding of the reality of finance and the importance of a steady, practical job and look to save money wherever possible. Offering practical tools like bill negotiation services that can help consumers save is another way to ensure FIs are providing Gen Z with their ideal payments experience.
The Most Digital Generation
This generation also grew up with access to technologies like smartphones, the internet, social media and more recently personal assistants like Amazon’s Alexa or Google Home. Moreover, Gen Z grew up with movies and TV on demand, iPods and iPhones/Android phones, Youtube, etc. all at their disposal and access to all the information in the world via the internet. This part of their upbringing also colors their attitude toward finance, since other generations have grown to value what technology can do for them, while this generation expects it. Superior user experiences through digital apps and mobile payments are not simply an option for Gen Z – they are a requirement. This generation expects information instantly and they expect their banking and payments to be a quick, easy and seamless experience, as well. Experience matters!
Unique Opportunities to Serve a Unique Generation
The unique attitudes of Gen Z toward finance present unique challenges and opportunities for financial institutions. FIs have the opportunity to offer education and resources to Gen Z to help them feel more confident in their financial decisions. By stepping into an educational role, FIs can help members of Gen Z understand best practices for money management. When they do, they have the opportunity to build valuable relationships and earn trust with this generation. A trust that will develop into new customers or members.
It will not be enough, however, for FIs to simply serve as a friend or teacher. Though that is an important role they should play, FIs must also provide smart, innovative technology solutions if they want to attract Gen Z. These solutions must add value to Gen Z’s lives, making money management easier and more convenient.
It is imperative that FIs are providing solutions that help ease Gen Z’s anxiety toward personal finance. Offering features like proactive bill payment can show Gen Z that their FI cares about them and wants to help make their lives easier. The same goes for other payments; Gen Z does not care how they pay a bill, a friend or move money to another account, they are more concerned that it is accomplished quickly and easily. For FIs, offering simple payments options that do the hard work for users will ensure that Gen Z experiences the value the relationship with their FI can add to their lives.
There is also an opportunity for FIs to go above and beyond simply offering proactive bill pay options by providing technology that can make recommendations for how Gen Z can save their money. A payments tool that goes beyond bill pay to give users insights on how they can make the best use of their money is crucial, especially with a generation that values saving as much as Gen Z.
When FIs are able to offer innovative solutions and much-needed financial education, they will become a friend and ally in Gen Z’s mind. Giving them what they need most in their finances will help build and strengthen their relationship with the FI. When Gen Z realizes the value and importance their relationship with their bank or credit union holds, they will be more likely to trust that financial institution with larger life decisions, including large loan accounts and wealth management services.
The key to building these relationships is cultivating understanding on both sides. When FIs understand Gen Z, or any generation for that matter, with all of its unique wants and needs, they have the prime opportunity to meet those needs, provide what they want and become a valuable part of that generation’s life. The same goes for Gen Z: when they understand the financial industry more clearly, they will not fear making important financial decisions. Though understanding a new generation may be challenging at first, each challenge presents an opportunity for FIs to adapt, innovate and improve. As the cycle of understanding new generations continues, the FIs that want to be successful must start early on in understanding the expectations and attitudes of the next generation.
Mickey Goldwasser is VP of Payrailz, a digital payments company offering secure, smarter more engaging and predictive payment solutions to banks and credit unions. For more information, please visit www.payrailz.com.
Article found online at: https://www.paymentsjournal.com/using-payments-tools-unique-needs-of-gen-z/